One of China's biggest investment banks has denied reports that it will default on a dim-sum bond

An arm of one of China's largest investment banks, Guosen
Securities, has denied that it will default on a bond traded in
Hong Kong, after an earlier report said it would miss coupon
payments on a so-called dim-sum bond in April.

The default would be the first by a state-owned enterprise in the
Chinese offshore market in nearly 20 years.

At their most basic level, dim-sum bonds are bonds issued outside
China but denominated in Chinese renminbi, rather than the
currency of the country where they're issued. The bonds first
became popular in 2010, when the Chinese government wanted to
encourage the renminbi to be used as an international currency.

That encouragement led renminbi stockpiles to develop in Hong
Kong and other offshore hubs, which in turn meant that dim-sum
bonds generally come with lower interest rates than debt issued
onshore in China.

According to analysts the FT spoke with, any default could set a
big precedent for the offshore units of Chinese companies in
terms of defaults. It is argued that offshore units of
state-owned Chinese companies have assumed that their parent
companies will stop any default, however if any bank were to
default, that would likely put paid to the belief.

While defaults in China's capital markets aren't hugely unusual,
the big shock when it comes to any potential default from Guosen
is that, as a whole, the bank seems to be in a pretty sure state
financially. In January it reported net profits of 14.2 billion
renminbi (£1.5 billion, $2.2 billion), a 188% increase from the
previous year. Guosen was also the eighth-biggest brokerage in
terms of total assets at the end of 2014, when the most recent
figures were released.

Investors in Guosen, which trades its shares in the city of
Shenzhen, didn't seem to be too worried by news of the reported
default, with shares closing 0.49% higher on Thursday.